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Steve Forbes Pitches a Euro Flat-Tax

Written by: Debra Borchardt09/28/12 - 9:01 AM EDT

NEW YORK (TheStreet) -- Struggling European countries now want more focus on growth and less on austerity. Steve Forbes tells TheStreet they haven't cut back at all.

Steve Forbes: What they're doing is giving themselves the worst of both worlds. That is they haven't practiced a lot of austerity on the public sector. They're crushing the private sector, many of these countries, with new taxes. France is about to raise their income taxes.

Deborah Borchardt: Good thing you're not in France.

Steve Forbes: If I was I wouldn't be. To 75 percent. You see it, Spain raised their top tax rate to 52 percent. Japan, not in Europe but in Asia, third largest economy in the world is raising their tax rates to 55 percent. So, they're crushing their private sector and they wonder why their economies continue to spiral downward. Hello.

Deborah Borchardt: Right. We're seeing that now Spain is saying how it's going to come up with a plan. Yet the plan is I need more money.

Steve Forbes: Yes. If you think there's a rich uncle or aunt out there, i.e. Berlin, Germany, you hope that the check will come in the mail and pay those credit card bills that you've racked up. But I think in the case of Spain, Portugal, Italy, Greece, what they have to do is start cutting their tax rates. Take Greece, five thousand businesses have moved since the crisis from Greece to neighboring Bulgaria. Thousands of Greeks have moved in their 20s and 30s that see no future for their country. Moving across the border to places like Albania, which has a 10 percent flat tax. Bulgaria has a 10 percent tax rate. So, if you have a benign tax environment, the capital and the brains and businesses will come to you. That's what these countries have to do but they haven't done it yet.

Deborah Borchardt: Is maybe that the solution for them? To go to the flat tax.

Steve Forbes: Go to something like the flat tax, make it easy to start businesses, have more freedom in the labor markets, which they don't. It's easier to get a divorce in Spain, than to let somebody go. Guess what, nobody hires if they can avoid it because they know it's a 20 year commitment. Make those kind of structural reforms, make those kind of tax reforms and they'd come back pretty quickly.